3 Life Events That Will Affect Your Taxes
There is no question that major life events are often points of transition and stress (good and bad!) that can have a significant impact on a wide variety of your day-to-day activities. As you weather these major life transitions, you may want to also consider how these transitions affect your finances, including your annual tax return. This way, when April 15th rolls around, you are not left wondering or worrying about a massive tax bill. We have outlined how three major life events can affect your taxes, so take note!
1. Marital Status
While you may assume that getting married will absolutely negatively affects your taxes (think “marriage penalty”), there are actually many positive implications that getting married can have on your tax bill. Changes have actually been made in the tax law in the last decade to lessen the marriage penalty. In addition, if the incomes of the spouses are very different (high and low), then this actually often helps, bringing the higher earner into a lower tax bracket.
Positive or negative, there are many things that shape how your taxes end up once you tie the knot. The first thing to consider is changing your filing status. Most newly married couples find that filing “married filing jointly” is the best bet, but you should probably run your taxes both ways to be sure.
2. Buying a Home
Buying a home is a HUGE step toward financial solvency. Even if your mortgage payment is higher than you would like, you are now eligible for many deductions that you could not take advantage of when you paid rent. As a homeowner, you can deduct any mortgage points, mortgage interest, real estate taxes, PMI (Private Mortgage Insurance), and even things like energy credits and home improvements. There is only one way to look at a home purchase as it relates to your taxes…it’s all good!
3. Having a Child
Having a child is hard work and costs you a lot of money over time. The IRS understands this and attempts to help families offset this burden. Every year after your child is born until they are 17, you receive an automatic $1,000 tax credit. In addition, when you claim your child as a dependent, you qualify for an exemption (of $3,900 in 2013). The key for being able to take advantage of these benefits is to make sure that you get a social security number for the new baby.
Consider Getting Help on Your Taxes During These Transitions
If you are undergoing a significant life event like marriage, buying a house or having a baby, you are likely very busy. You should make sure to take advantage of all of the potential tax benefits related to this major life event. If you need help with this, consider hiring a tax firm to review your return before you submit it during a year with a big change. Success Tax Relief can make sure that you are not missing any big deductions or credits. Call Success Tax Relief at (877) 958-6638 for a free estimate.